Introduction

Financial institutions are expected to respect human rights under UN Guiding Principles and OECD Guidelines, requiring robust human rights due diligence (HRDD) across operations and value chains. Despite progress, only 6% of 400 major institutions have adequate processes. The sector faces challenges in data availability, prioritisation, and influence over clients, yet plays a key role in enabling responsible business conduct.

Human rights expectations for the financial sector: A brief overview

Institutions must establish policy commitments, HRDD processes, and grievance mechanisms to identify, prevent, mitigate, and account for impacts. HRDD applies across financing, investment, and insurance activities, covering direct, contributory, and linked impacts.

A key feature is a ‘risk to people’ lens, prioritising severity over financial materiality. HRDD is iterative, extending beyond transaction-based assessments, and requires engagement with affected stakeholders or proxies. Implementation varies by asset class, financial product, and level of leverage, requiring tailored approaches.

What does progress look like? Attention points for maturing human rights due diligence across the financial sector

Progress requires stronger internal policies, governance, and incentives to shift from reactive to proactive HRDD. Institutions must embed human rights responsibilities alongside client accountability and integrate them across decision-making processes.

Prioritisation remains complex due to portfolio scale and limited data. The UNGPs recommend focusing on severity—scale, scope, and irremediability—rather than financial exposure. However, imperfect ESG data can lead to ‘action paralysis’. Institutions are encouraged to act pragmatically, using available information while improving data quality.

Leverage is central to managing impacts, including financial conditions, engagement, collaboration, and expertise. Effective strategies combine multiple forms of leverage and adapt to context. Institutions should focus on creating tangible improvements for affected people rather than relying solely on risk assessment.

Case studies

Case studies illustrate varied approaches across banks, investors, private equity, and insurers. ING integrates HRDD into credit processes, requiring enhanced due diligence for high-risk transactions and using conditional lending or disengagement where risks persist. SpareBank 1 Sør-Norge embeds ESG assessments in lending, lowering thresholds to expand coverage and using collective initiatives to address sector risks such as ship recycling.

AP6 focuses on private equity, assessing general partners using structured tools and promoting peer learning, while noting low initial alignment scores (average 4/10). AP Pension strengthened governance and data systems following EU disclosure requirements, improving monitoring and internal accountability.

NN Group applies HRDD in insurance underwriting through sector risk mapping and client engagement, though data gaps and limited leverage pose challenges. Permira integrates human rights into investment decisions and portfolio monitoring, aligning with UNGPs and emphasising grievance mechanisms and stakeholder engagement.

Across cases, common themes include early risk identification, enhanced data use, active engagement, and combining leverage tools to influence outcomes.

Annex 1 Examples of financial institutions exercising leverage to improve respect for human rights

Examples demonstrate practical use of leverage, including contractual conditions, client engagement, collaboration, and capacity building. Institutions often combine approaches, such as requiring remediation plans, conducting enhanced due diligence, or exiting relationships where risks remain unaddressed.

Collective action, such as investor coalitions and industry standards, amplifies influence, particularly where individual leverage is limited. Softer mechanisms, including expertise sharing and relationship management, complement formal tools in driving change.

Annex 2 Resources

The report compiles guidance and tools supporting HRDD implementation, including OECD due diligence frameworks, UN guidance, and practical toolkits from organisations such as UNEP FI and the Principles for Responsible Investment. These resources support financial institutions in aligning practices with international standards and improving human rights outcomes.